Written by

Free Press Staff Writer

MONTPELIER — House budget writers found they could quickly agree Thursday morning that they wanted their tax-writing colleagues to come up with $4.4 million in new revenues to help balance the House version of next year’s budget for state government.

The tougher task that the House Appropriations Committee expected to focus on Friday would be finding another $5 million to pare from their budget plan. They have a list of items from Gov. Peter Shumlin’s budget plan that they have yet to include and another list of expenditures that some on the panel hope they can fit into their plan.

As soon as the budget writers settled on the revenue figure, Appropriations Chairwoman Martha Heath, D-Westford, ran downstairs to inform the House Ways and Means Committee, which has been taking testimony about three possible tax sources to raise the revenues the budget writers might need. The options are increasing the cigarette tax or charging sales tax on soft drinks and dietary supplements.

The two House committees find themselves talking about new revenues because the Ways and Means panel rejected the Shumlin administration plan to balance the governor’s budget by raising $14 million from an increase in a tax on insurance claims. Rejecting that revenue source punched a $14 million hole in the budget that the House had to address with budget cuts or other new money.

Heath said House budget writers had identified $5 million in savings in the governor’s budget and reached consensus on asking for $4.4 million in new revenues from sources other than the claims tax. They still had to find an additional $5 million in savings before voting on the budget bill.

Money matters were priorities Thursday as the House wraps up work on tax and budget measures to send to the Senate.

House Ways and Means will formulate the new revenue package Friday.

Meanwhile, the House Government Operations Committee took action on a bill that impacts the bottomline of the budget bill. The panel voted 6-5 to recommend a bill setting salaries for state officials whose pay isn’t governed by contract negotiations and setting the overall amount needed to cover all pay increases next year.

(Page 2 of 3)

Budget choices

Heath sent her committee home Wednesday night with an assignment. They needed to review the lists of expenditures yet to be decided and come up with the amount they thought needed to come from new revenues.

Thursday morning, Heath went around the room asking each member for the number. The suggestions ranged from Rep. Philip Winters, R-Williamstown, suggesting zero new taxes to Rep. Alice Miller, D-Shaftsbury, proposing $8.1 million. Most of the committee landed between $3 million and $6 million, which is how the panel settled on $4.4 million.

Miller had asked Wednesday evening if the committee could ask Ways and Means for all the rest of the money needed to close the budget gap — $9 million in new taxes.

Not an option, Heath advised. “I think if we recommend $9 million, they would say ‘no.’”

Still pending as the committee wraps up its work today are decisions about increasing funding for the University of Vermont, state colleges and Vermont Student Assistance Corp. by two percent for half the budget year and giving a two percent rate increase to health care providers serving Medicaid patients.

Tax options

Removing the sales tax exemption from soft drinks would generated $4.2 million in new revenue, with $2.7 million available for the General Fund and $1.5 million going to the Education Fund, Sara Teachout, one of the Legislature’s fiscal analysts, told Ways and Means members.

Thirty-five states already tax soft drinks, Teachout said. They define soft drinks as nonalcoholic beverages that contain natural or artificial sweeteners. Milk and milk-like products would be excluded from this definition.

Tina Zuk of the American Heart Association in Vermont argued against putting a sales tax on soft drinks, saying it would undermine efforts to enact an excise tax on sugar-sweetened beverages. The excise tax raises the price that people see on the products, which would be more effective in changing buying behavior, Zuk argued.

Taxing dietary supplements would produce $3.1 million, with $2 million for the General Fund and $1.1 million for the Education Fund, Teachout told the committee. She said dietary supplements would include vitamins and herbal supplements.

(Page 3 of 3)

Gabriel Archdeacon, a naturopathic physician, testified against taxing dietary supplements, saying many people rely on them for nutrients they can’t get elsewhere. He listed many serious diseases associated with nutrient deficiencies.

Ways and Means Chairwoman Janet Ancel, D-Calais, asked if there was data that showed higher incidence of these diseases in the 37 states that tax dietary supplements. Archdeacon said he didn’t have an answer to that question.

Tom Kavet, the Legislature’s economist, provided estimates for a range of cigarette tax increases. A quarter added to the current tax of $2.62 would generate an additional $2.2 million. Raising the tax by $2 would bring in about $10 million, Kavet said.

Rep. Carolyn Branagan, R-Georgia, said she wanted to vote for an increase in the cigarette tax, but said she worried about the impact it would have on little stores in rural Vermont.

Karen Lafayette, a lobbyist for the Vermont Low Income Advocacy Council, supported the cigarette tax because of the health benefit and responded to Branagan’s concern. “I would hate to see us keep cigarette sales high because it helps the economy and the profitability at convenience stores.”

Pay bill

Before the Appropriations Committee could wrap up the budget bill, the House Government Operations Committee had to make a decision on the government pay bill.

The original pay bill called for a 4.2 percent cost of living increase for state officials who aren’t part of bargaining units. The percentage increase mirrored the 2.5 percent across-the-board pay raise and 1.7 percent step increases that the Shumlin administration agreed to in a new contract with union workers.

Some members of the committee balked at the size of the increase. Even after the percentage was reduced to 3.3 percent, nearly half the committee opposed the bill.

“In all due respect to all state employees, I believe it is an exceptional raise at this time, so I will be voting no,” Rep. Mark Higley, R-Lowell, said.

Steve Howard of the Vermont State Employees Association defended the percentage increase in the contract, noting that many state employees “make about 13 percent less than their counterparts in the private sector.” He said, too, that 51 state employees work full-time and their children qualify for free lunch, while 663 workers qualify for food assistance.

State Human Resources Commissioner Kate Duffy said the 3.3 percent pay increase listed in the bill is a limit on how much the executive branch could boost the pay for non-union employees next year. This year the limit in law was 3.7 percent and the administration gave 2.1 percent increases, Duffy said.

As for the percentage increase the administration might offer next year, Duffy said, “We never would give 3.3 percent.”